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New Zealand came out of the
Second World War with a successful and expanding
economy based on agriculture. During a period of
complete employment which was sustained in the 50s
and 60s, the gross domestic product of New Zealand
increased at an annual average rate of four percent.
Partly because of the Korean War, the wool industry
experienced a boom which resulted in the high prices
of agriculture.
Unfortunately there were signs of weakness in the
economy even during this time. |
The Economic and Monetary Council advised the State in 1962
that in the period from 1949 to 1960, the GDP of New Zealand
had been one of the lowest among the world’s high ranking
earning economies.
The late 60s saw the New Zealand government facing an
increasing balance of problems in payment. Succeeding NZ
governments grappled to maintain the high standard of living
of the country by increasing the amount of borrowing from
overseas sources and by increasing defensive policies in
economics.
In 70s, the economic problems of New Zealand increased. Key
world markets’ agricultural commodities access became
difficult increasingly. In 1973 to 1974, there was a sharp
oil prices increase which coincided with price falls taken
from exports.
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As with several countries of the OECD, New Zealand
policies were primarily aimed at sustaining a high
level of employment and activity in economics in the
short term.
Levels of domestic industry protection
were high and greatly challenged aggressiveness and
the ability of the economy to adapt itself to the
world’s changing environment.
Macro expansionary policies combined with assistance
in the industry resulted in imbalances in
macroeconomics, problems in structural adjustment,
and fast increase of the indebtedness of the
government.
The position of New Zealand further deteriorated in 1979 and
1980 after the succeeding major shift in commodity and oil
prices.
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Onwards from about 1984, New Zealand’s economic policy
direction turned towards eradication of many kinds of
assistance from the government and away from intervention.
On the level of macroeconomics, policies were geared towards
achieving minimal inflation and a solid fiscal position
while reforms for microeconomics were established to ready
the economy to pressures of competition and global prices.
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Included reforms were exchange rate floating,
eradication of controls on the movements of capital,
the termination of industry assistance, the ending
of controls to price, deregulation of a large number
of the economy’s sectors, privatization and
corporation forming of assets owned by the state,
and legislation of the labor market geared towards
allowing more adaptable patterns of income
bargaining.
After a time of weak growth in the period of the
late 80s, the economic performance of New Zealand
improved a lot during the 90s. |
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The economy began to grow stronger from middle of 1991, with
an exceptionally strong output during 1993 to 1996, with a
yearly average increase in real gross domestic product
peaking in June 1994 at 6.8 percent
This period of growth began to slow down in 1997 and 1998
because of the slowdown in important trading partners from
Asia partnered with a drought that involved big parts of the
nation during this period.
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